I retired as CEO of an Automotive Parts supplier, and manage an investment portfolio for myself and family. I have a BA in History from Royal Military College of Canada and an MBA from the University of Western Ontario. My first career was as a fighter pilot in the RCAF, and, following my MBA I... More

Apple (NASDAQ:AAPL) extracted mega purchase commitments from U.S. carriers such as Verizon (as much as $45 billion over 3 years beginning 2010. AT&T and Sprint made outsized commitments as well. Now that the iPhone popularity is fading, the carriers may come to regret their commitments and find disfavor with Apple for compelling them to enter into such contracts just to be supplied with the iPhone.

What goes around comes around. This could play out a number of ways. First, for example, Verizon might just pay Apple the estimated $14 billion some reports suggest it is short on its commitment. Or, it might try to renegotiate the arrangement.

One thing is certain - the carriers once bitten will be twice shy about such agreements going forward, and their enormous support for Apple is likely to wane. Without such support, including massive subsidies for iPhones, Apple market share is going to come under pressure.

I have no current position in Apple, but expect to add a short position on any strength.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I may write both puts and calls on Apple on the eve of its earnings call since I think the stock will simply drift sideways and both options will expire worthless

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"Verizon might just pay Apple the estimated $14 billion some reports suggest it is short on its commitment. Or, it might try to renegotiate the arrangement."

Or Verizon might stop pushing other cell phones so hard and just meet its commitment to Apple.

Michael, you've been in a Verizon store, yes? Ever try to buy an iPhone... Very hard to do with salesmen who are programmed to counter sell any phone, but iPhone.

I'm not shedding any tears for V, just a dishonest organization with legendary bad customer relationships and service. The $14B will make them honest, at least. And if Apple loses their business, good riddance.

Author’s reply »
Good comment. I am not surprised that Verizon does not promote Apple - the commitments extracted from them were close to extortion in my view. And, if Apple loses Verizon it will cost its shareholders dearly. All that is happening is the balance of power is shifting, and shifting away from Apple. Its carrier relations will become increasingly important in years to come as the market matures, and telling your customer they can only have the product if they commit to massive orders does not win friends long term.

I don't think Verizon's honesty is in doubt and I am disappointed you would question it without a solid fact base. Exchanging views is one thing, calling a company dishonest is another.

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